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Below, you'll find a summation of the major implications of the Tax Cuts and Jobs Act for businesses and corporations. Download a .pdf of the changes here.
These changes are effective January 1, 2018, unless noted otherwise.
Tax Rates
- Beginning January 1, 2018, the corporate tax rate is a flat 21%.
Dividends Received Deduction
- The 80% and 70% dividends received deductions under current law are reduced to 65% and 50%, respectively.
Alternative Minimum Tax
- Effective for tax years beginning after 2017, corporations are no longer subject to AMT.
Pass-through Business Deduction
- Non-corporate taxpayers, including trusts or estates and individuals, who have domestic qualified business income (QBI) from a partnership, S corporation, or sole proprietorship are allowed to deduct 20% of business-related income, subject to certain wage limits and exceptions. The remaining income is subject to normal individual rates.
- The deduction is also not allowed for businesses offering certain personal services, such as CPAs, lawyers, physicians, consultants, etc.
- The deduction
ratably
Domestic Production Activities Deduction (DPAD)
- Repealed effective for tax years beginning January 1, 2018.
Like-Kind Exchanges
- The non-recognition of gain as income in the case of the like-kind exchange of property used in a trade or business or for investment is limited to real property only.
Net Operating Losses
- Net operating losses are limited to 80% of taxable income for losses arising in tax years beginning January 1, 2018.
- The two-year carryback and special carryback provisions are repealed except for losses incurred in the business of farming. Carryovers are allowed indefinitely.
Section 179 Expensing
- The maximum amount of qualified property cost
expensable under §179 increases to $1,000,000.
Bonus Depreciation
- New bonus depreciation rules allow for 100% deduction of the cost of new and used qualified property placed in service between September 27,
2017 and December 31, 2022.
Vehicle Depreciation
- The cap placed on depreciation of business-use vehicles is increased and indexed for inflation.
Entertainment Expenses
- No deduction is allowed for the cost of (1) an activity generally considered to be entertainment, amusement or recreation, (2) membership dues with respect to any club organized for business, pleasure, recreation or other social purposes, or (3) a facility or portion thereof used in connection with any of the above items.
- Meals provided to employees at the convenience of the employer are 50% deductible.